My fee unpaid

[Greta]

Some 5 years ago on this discussion board someone suggested an ingenious letter to send to a client who did not pay his fee. Something to the effect that I will contact the IRS that the tax return was inaccurate because I signed it as a "paid preparer." I sent that letter and it worked a miracle. Can you possibly re-publish it? I need it again!

[abctax55]

It's highly unlikely, given this "NEW & IMPROVED" version of the forum, that such an old post survived.

Technically, such a letter isn't valid, as you are a paid preparer even if one particular client fails to pay.

[abctax55]

Google is a wonderful thing....

http://www.taxalmanac.org/index.php/Discussion_Non_payment_of_Tax_Prep.html

[itonewbie]

I seriously doubt many educated clients will view that as a real threat because outstanding payment of professional fees due on a return does not render the return incorrect.

Furthermore, you are still technically a paid preparer for that return because you would have gotten paid had it not been for your client defaulting on you, which is a commercial matter.

Circular 230 provides that you can withhold the return along with your workpapers from an unpaid client.  If you did not take advantage of that and e-filed the return, because your billing process does not require a full payment before, the client's check bounced, or otherwise, you will still be held accountable for the completeness and accuracy of that return.  Just imagine what the IRS will need to deal with if tax preparers can disavow returns they prepare but have collection problems with.

[IRonMaN]

Obi-wan - I'm not a poker player myself, but I believe the game refers to moves similar to the letter going to the IRS as a bluff.  Personally, I would never write a letter like that, but it probably is good enough to get some folks nervous enough to get their bill paid up.  The only good thing about going that route, you probably aren't going to serve as much time in jail as you would breaking someone's kneecaps - the more common bill collecting technique. 

[linette]

Devil's advocate:  Is that a threat that in some way would be an ethical violation on our part as a professional?

Personally, I wouldn't use a letter like that.

[Just-Lisa-Now-]

I wouldn't use a letter like that ....if you dont get paid upfront you risk not being paid.  I dont gamble more than I'm willing to lose.

[dkh]

Many years ago at a tax seminar I attended one of the speakers mentioned she used this tactic to collect past due accounts.   I had a copy but never sent it to a client.  I've had success collecting just by adding a finance charge to the account.

[Camp1040]

I agree with @IRonMaN , traditional method........kneecaps. Just saying.